The company's share price dropped 3.4% at the start of London trading on Thursday, before recovering to end the day up 0.5%.

This retailer's shares had dropped a cumulative 3.2% over the previous two days on fears of poor sales figures that proved unfounded.

Dixons conceded that its profit margins had been squeezed during the reporting period, but attributed this to a change in the mix of products that customers were buying - with low-margin tablet computers selling particularly well - rather than rising costs or price discounts.

Full-year profits would be £75m-£85m, the firm said.

Mixed fortunes

The retailer continues to face problems with its continental business.

Sales in southern Europe - including Italy and Greece - fell 8% but remained profitable, while in northern Europe they rose 11%, reflecting the mixed fortunes of the various eurozone economies.

Sales fell 25% at Dixons' troubled French online retailer Pixmania. Dixons bought out the remaining shares in Pixmania last year in an attempt to turn the business around, and has been forced to write off much of the value of its investment.

"The single-channel operation Pixmania was disappointing, but we are making good progress in our restructuring plans, which are designed to put the business on a better financial footing," said chief executive Sebastian James.